University of Texas at Dallas - Naveen Jindal School of Management; China Academy of Financial Research (CAFR)

Date Written: August 23, 2016

Abstract

We examine the implications of short-run and long-run consumption risks on the momentum and long-term contrarian profits and the value premium in a unified economic framework. By introducing time-varying firm cash flow exposures to the short-run and long-run shocks in consumption growth, we find the otherwise standard intertemporal asset pricing model goes a long way toward generating the momentum and long-term contrarian profits and the value premium. The model also reproduces the size effect, the pairwise correlations between the profitabilities of these investment strategies, and the performance of the standard CAPM and the consumption CAPM in explaining these well-documented return behaviors.

SSRN Rankings

About SSRN

We use cookies to help provide and enhance our service and tailor content.By continuing, you agree to the use of cookies. To learn more, visit our Cookies page.
This page was processed by aws-apollo4 in 0.203 seconds